new Delhi : There is an old saying that one should not put all his eggs in one basket. This is also true for investment. This means that you should not invest all your money in a single asset class. No one would have expected that the pharma fund, which has been struggling since 2015, would give more than 50% returns due to the epidemic. Therefore, it is important that investors should diversify their portfolio keeping in mind their risk appetite. Ideally, investors should choose assets based on their financial goals rather than on the basis of past performance of the asset class. As a general rule, investors should reduce their age from 80 to a strategy of investing in equity and debt.
Emergency fund is necessary
Hard times do not come by telling. The crisis has underscored the need for emergency funds. It is a savings fund that should be used only for difficult times. During the 2008 recession, the crisis of liquidity was looming, but the epidemic had stopped the whole world. Having an emergency fund ready, not only can it be used in difficult times, but it also prevents the wasteful sale of your investment. It will be necessary for the investors that they should keep their three to six months expenses as an emergency fund.
Investment in gold is right
It makes sense to invest in gold. It is known from this that whenever the stock market shocks in difficult times, gold prices keep moving upwards.
Investors should not view gold as just jewelery because it has the potential to provide defense in times of bad equity. The correlation between the two asset categories is very low and this is why gold provides protection against equity investment. You can invest up to 5-10% in it.
An epidemic, heavy on the entire economy
Many disasters and diseases have occurred in human history, which spread through air or water. But there was no such epidemic, which made the whole world stand out. No one would have even dreamed that in the whole world, can there be a lockdown in any country. Today’s epidemic caused havoc as well as financial disaster.
Governments are still struggling with the dilemma of how to get economic activities back on track. It emphasizes that every person should have adequate health cover and better lifestyle.
Other sources of income are also important
It is very important for everyone to have a second source of income. It can also be a passive means of earning. The unemployment rate in the month of May was 24.48%, which suggests that the job can go anytime. Today people are earning money just by putting videos on YouTube, while many people also earn through blogs. You can raise another source of income for your family through your skills or new skills. One of the best ways to generate another source of income for yourself is to invest your money wisely. A good option is to make consistent, regular and disciplined investments in asset classes such as equity, mutual funds, gold or real estate.